Three Ways to Become Self-Sufficient, TODAY

Can your business or NPO stand strong right from the outset?

Photo credit: sammy swae on Unsplash

One of the biggest challenges you and your enterprise will face together is building financial and operational self-reliance, and securing it as solidly and as early as possible. Getting there is the subject of a truly staggering number of books, talks, courses: in fact, there are people who’ve made this topic their entire life’s work!

Which makes perfect sense! Just as there’s no single way to make a martini ^{(no cats were harmed in the making of this turn of phrase!)}, there's a myriad ways to get you self-sufficient. Of course, this fact does end up being massively intimidating: you’re not exactly made of money and it’s very likely you don’t have the time to try ALL of them out to see which ones work best.

I’ve got 3 good ones that you can get into, best of all they’re all methods you can try as soon as you finish reading this edition!

Start with Value-Capturing FIRST

When you’re in a hole, the first thing you’ll look for is anything that looks like a ladder. Likewise, when you’re not yet flush with cash you’ll look for anything that will get the money flowing in.

The first most obvious place will naturally be clients and donors, which is perfectly accurate here’s your gold star. However, most enterprise leaders panic when the money isn’t flowing in fast enough and start deprioritising their actual revenue channels to heavily focus on getting grants, subsidies, or outside investors before properly stabilizing their value creation.

This is a death-spiral: the more you rely on grants and subsidy incomes, the less ‘proof of concept’ you have by way of income from actual customers and donors. Which ironically nails you with outside investors, because if you can’t prove that your offering create value in a way that draws customers and donors, you’re screwed.

So what should you do instead? Build activities that drive value creation and revenue generation directly into your operations from the start. By doing this, you’re making sure that revenue replaces rescue funding.

• Build around the Value Need(s): with every product or service that your customers and donors engage with, there’s a larger rationale behind why they go for that specific one. Find out that rationale, and build your offering with satisfying that rationale first in mind

• Start with cash-flow-positive micro-activities: this is now value creation for you. When you’re starting out, focus on operations and activities on a smaller scale that generate revenue quickly, rather than ventures that’ll need a whole lot of money upfront. That revenue will form the foundation of the rest of your operations
  

Create Local Supply and Demand Loops

Bad news: self-sufficiency is in fact a group project! To be able to generate income reliably, you need economic circulation happening in your area. It’s kind of a self-sustaining loop: the more money moves around, the more at ease people are with parting with their own money to give to you, and every cent that circulates locally reduces reliance on outside funding.

Now how do we get that? We’ve got to make sure that local supply and demand is robust enough to support you AND everyone else around you.

• Build out value chains around you: create local procurement commitments between enterprises in your area. You know how you’ve got suppliers, and you could be a supplier in turn? Well you can leverage that and form relationships of interdependence with suppliers around you, which can help secure yourself additional revenue and reduce supplier costs ^{(if you negotiate well!)}

• Find anchor buyers to sign supply agreements: as you’re establishing yourself try to find your ‘evergreen buyers’ (people who’ll essentially be your rain-or-shine customers or donors) and establish agreements to be their major or primary supplier. This secures you solid recurring revenue

• Incentivize residents to “buy local” through loyalty schemes: the beauty of this one is that you could eve use the value chains point to create a greater incentive! All those lovely relationships you’ve built as local suppliers can be leveraged to create a group loyalty scheme that includes ^{(most if not all)} businesses in your area, further incentivising locals to buy local

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ACTUALLY Track Self-Sufficiency

Finally, you’ve got to include metrics that show you how you’re doing in the self-sufficiency department in the stats that you pull to check how your enterprise is doing. In fact, you’ve got to start thinking of the amount of self-sufficiency itself as a measure of how your enterprise is doing growth-wise.

So what does self-sufficiency look like, stats-wise? Well, here’s just a few to get you started.

• % of costs funded from operating revenue: it’ll be vital to know how much of the money that comes in is actually coming in from you moving your offering. This number will widely differ depending on your type of enterprise, but a good rule of thumb is no less than 60%

• Debt-to-cash-flow ratio: too much debt and a lack of financial liquidity ^{(and thus mobility)} is the most usual and fastest way that enterprises go under. Your aim here to keep your debt reasonably low and make sure you’ve got enough actual cash coming in and not tied up in investments or commitments, to be able to keep the lights on and save you in the event of a sudden financial happening

• Local procurement ratio: this metric will give you an idea of how you’re contributing to maintaining your local value chains, AND how many local value chain participants are keeping you sustained. A healthy chain is a supportive chain!

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Building a business or non-profit that can stand on its own from day 1 isn’t a far away dream, you can absolutely get started on your day 1 or as soon as you can manage. And if you ask me, that should be the aim anywaaayyy…

Next week we’ll be delving a little deeper into this conversation, so keep your peepers peeled for more!

Like my work? You can get more of it!

• Listen to my podcast, Inside Value, on Spotify, Apple Podcasts and YouTube
  (be sure to subscribe!)

• Book me to speak or host a workshop at your event, company or organization

• Check out our Value creation work over at Vivre Consulting

• Connect with me on LinkedIn!